Loss mitigation is one of many options that can help you avoid foreclosure. You may be able to keep your house in loss mitigation, but it’s not guaranteed. Learning more about your options can help you decide which path could help you save your home in foreclosure.
In loss mitigation, you’ll work with your mortgage servicer to avoid foreclosure on your home. However, mortgage servicers don’t have your best interests in mind and are only trying to protect their investment. Consulting an attorney is a good idea to help you protect your rights in loss mitigation. A foreclosure attorney can help walk you through your options and help you negotiate with your lender for the best outcome for you.
Joshua Denbeaux is an experienced New Jersey foreclosure attorney who’s committed to fighting for consumer rights. Contact Denbeaux Law today to learn more about how we may be able to help you avoid foreclosure and stay in your home.
What Is Loss Mitigation?
Loss mitigation is a step that you can take with your servicer. In the loss mitigation process, you work with your servicer to avoid foreclosure on your home, with the goal of finding a way to prevent financial loss.
Loss mitigation means reducing the potential loss to the investor that can come with foreclosure, which means that your rights as a homeowner aren’t prioritized during loss mitigation.
While there are benefits to loss mitigation, like avoiding having foreclosure on your credit score, loss mitigation may not be the best option for you because there are lots of options in loss mitigation. The lender will generally decide what happens, and it may not always be in your favor.
There are a lot of loss mitigation options available. Some options could help you stay in your home, but there are some options that might not keep you in your home.
How to Qualify For Loss Mitigation
Most lenders require you to have some sort of financial hardship in order to qualify for loss mitigation. In the application, you’ll need to describe the change in your financial situation that is preventing you from being unable to pay your mortgage. A financial hardship for loss mitigation is any circumstance outside of your control that reduces your income or increases your expenses. Here are a few examples of qualifying financial hardship:
- Unemployment
- Temporary or permanent disability
- Uninsured medical expenses for a family member
- Divorce
- Death
Your mortgage servicer may also request information, such as pay stubs, to better understand your current financial situation.
Loss Mitigation Options
There are a variety of loss mitigation options that your mortgage lender might offer you. These are a few of the most common options presented to lenders during loss mitigation.
Forbearance
Forbearance is a short-term mortgage relief program. Under forbearance, your mortgage payments will be paused for some time.
A forbearance gives you time to get back on your feet financially without making mortgage payments. Your repayment options will depend on what your lender offers.
Repayment Plan
You can work with your mortgage servicer to create a repayment plan. Under a repayment plan, back payments will be added to your monthly payment for several months until you’ve caught up on what you owe.
A repayment plan will significantly increase your monthly payment until you’ve repaid what you owe on your mortgage.
Loan Modification
A loan modification is a change to your original mortgage terms to make it more affordable. You have to work with your lender to get a loan modification.
Loan modifications can lower your interest rate, extend your loan term to lower monthly payments, or split your payments into smaller amounts.
Reinstatement
You can reinstate your delinquent mortgage by repaying all of your past-due payments at once in a single payment. Reinstating your mortgage is the easiest way to bring your loan current. Reinstatement can be an expensive option.
It’s important to make sure your payment is for the entire amount. You have to include fees for all late and missed payments in your payment amount. Reinstatement can be unaffordable because of the high cost at one time.
Sell Home
Selling your home is an option to avoid foreclosure if you and your servicer don’t think there’s a realistic way that you can afford to stay in your home. You can use the money from the sale of your home to pay off your mortgage.
Selling your home is only an option early in the process. You can’t decide to sell your home as a normal sale if your home is under foreclosure. A sale would need to be completed before your home enters the foreclosure process.
Short Sale
A short sale is an option to avoid foreclosure, where you sell your home for less than its market value in order to avoid foreclosure. Short sales are done through an agreement with your lender, and your lender has to approve the sale and terms of the sale before it goes through.
After selling your home through a short sale, you may still owe some money on your mortgage. A short sale can hurt your credit, but it won’t hurt your credit as much as a foreclosure would.
Deed-in-Lieu of Foreclosure
A deed-in-lieu of foreclosure is an agreement between a homeowner and a lender in which the homeowner voluntarily gives the deed of the home to the lender in order to avoid foreclosure.
A deed-in-lieu of foreclosure has to be approved by your lender. Before agreeing to a deed-in-lieu of foreclosure, your lender will assess the value of the home to make sure it’s worth possessing.
Pursuing a deed-in-lieu of foreclosure should be a last resort option to avoiding foreclosure because you will lose your home.
Contact a Foreclosure Attorney Today
There are a lot of loss mitigation options that are available to help homeowners stay in their homes and avoid foreclosure. It’s important to understand all of the options that are available to you.
A foreclosure attorney can help walk you through all of your available options and help you negotiate with your lender.
Contact Denbeaux Law today to learn more about how we may be able to help you through the loss mitigation process.
